Political Economy of Suicide: Financial Reforms, Credit Crunches and Farmer Suicides in India

Over 250,000 farmers have committed suicide in India since the mid-1990s. Studies – both case studies of states and at the individual-level - attribute these deaths to credit crunches in the agrarian sector and increased debt burden among farmers. Most of the farm suicides have, however, taken place in five of India’s 28 states, suggesting that adverse financial circumstances affected farmers only in some states. Why did mounting debt and credit crunches affect farmers only in some states? This paper offers an answer by relating farm suicides to the financial reforms the country undertook since the 1990s. Using an instrumental variables approach, it shows how increased competition in the banking sector diverted lending away from agriculture to create dire economic conditions that facilitated farm suicides in some Indian states.